Sun, 29 Nov 2020

Bar Harbor Bankshares Reports Second Quarter Results

28 Jul 2020, 08:05 GMT+10

BAR HARBOR, ME / ACCESSWIRE / July 27, 2020 / Bar Harbor Bankshares (NYSE American:BHB) reported second quarter 2020 net income of $8.5 million or $0.55 per share; up 41% over the same quarter of 2019 of $6.1 million or $0.39 per share. The non-GAAP measure of core earnings in the second quarter 2020 totaled $8.6 million, or $0.56 per share compared to $6.3 million or $0.41 per share of the same quarter of 2019.

SECOND QUARTER FINANCIAL HIGHLIGHTS (compared to the second quarter of 2019, unless otherwise noted)

  • 18% annualized growth in commercial loans, excluding paycheck protection program (PPP) loans
  • 32% annualized growth in total non-maturity deposits, excluding balances from PPP loans
  • 3.00% net interest margin compared to 2.65%
  • 12% increase in non-interest income, excluding $1.4 million in security gains
  • 0.54% non-accruing loans to total loans, excluding PPP loans, compared to 0.66%
  • 0.90% return on assets, compared to 0.67%

President and Chief Executive Officer, Curtis C. Simard stated, 'Coming out of the first quarter of uncertainty, our teams communicated directly with their customers to better understand the developing challenges and opportunities. As a result, they took on the economic headwinds in stride while improving profitability during the second quarter 2020. Return on assets improved by a full five basis points to 0.90%, which is a trend we expect will continue as we execute on strategies throughout all aspects of business operations. Commercial loans led the quarter with strong double digit growth even excluding the influx of PPP loans. This demonstrates our understanding of client needs, while creating opportunities with targeted prospects. Given the lower interest rate environment, we tailored our strategy towards leveraging the secondary market sales platform for our mortgage production. We built fee income in lieu of interest income as we allowed residential loan balances on balance sheet to contract. As a result, mortgage banking income doubled compared to any prior quarter.'

Mr. Simard continued, 'Credit quality remains strong in the current economic cycle. We continue to adhere to our strong credit culture with proven operators who have weathered previous cycles and have diligently managed our underwriting practices during these uncertain times. Risk ratings on loans remained steady with the first quarter 2020 levels with lower past due accounts and net charge-offs near record lows. The Company's second quarter provision for loan losses increased slightly by $243 thousand, which included overall higher economic qualitative factors plus a specific reserve on one long-standing commercial relationship, offset by other credit quality improvements. I'm proud to say our workout team has a strong history of settling non-performing loans for the carrying values or higher.'

Mr. Simard further stated, 'PPP loan originations leveled off by mid-June for a total of approximately 1,900 loans with a total principal balance of $131.5 million and net unearned fees of $5.3 million. Accretion of the net fees began in the second quarter and is expected to be somewhat accelerated by the end of the year depending on the timing of customer forgiveness and processing by the Small Business Administration (SBA). Throughout the second quarter we modified close to 800 loans totaling about $400.0 million, which were mostly temporary principal deferrals with normal interest accruals. At quarter end almost 20% of the modified loans resumed payments under normalized arrangements with the remaining population expected to migrate to regular payments in the second half of the year. Accrued interest recorded under the modified plans currently totals $2.4 million, all of which is expected to be collected over the remaining lives of the loans.'

Mr. Simard went on to say, 'Non-maturity deposits were a significant source of funding during the second quarter and were up 32% on an annualized basis, excluding deposits from PPP loans, further reducing reliance on wholesale funding. Excluding the Federal Reserve credit facility for PPP loans, senior borrowings, were down 17%. We continue to actively manage the balance sheet and support net interest margin by locking into lower cost wholesale funding through a mixture of longer durations and derivative instruments, and managing our cost of deposits in line with market expectations. We are also further executing on deleveraging and/or remixing various asset classes, taking advantage of the market disruption. Additionally, the Company continues to have access to a significant amount of funding through diversified sources of liquidity.'

'The Company's capital position is strong and risk-weighted capital ratios are quickly approaching levels seen in the third quarter of 2019 prior to the branch acquisition. We also began repurchasing Company stock accumulating 392 thousand shares or $7.3 million at the end of the second quarter. Last week we issued a press release declaring the Company's third quarter dividend to investors. We view dividends as an integral part of maximizing shareholder value and we are proud of the Company's strength and ability to maintain these distributions.'

Mr. Simard concluded, 'Our commitment to serving our customers throughout the branch footprint continues and our branch lobbies are now fully open adhering to national and state safety standards. As we look to the second half of the year, unknown volatility in economic conditions and financial markets could impact the financial performance of the Company. Given our operating model, disciplined approach to underwriting, and proven execution of delivering on our strategies, we feel well-positioned to handle these potential challenges as they emerge. As we think about the second half of the year, we will be disciplined and nimble, ready to take action as we have in these past few quarters. We remain committed to our profitability and tangible book value growth, navigating expense management and positive operating leverage during this period.'


Total assets increased $102.9 million to $3.8 billion from the first quarter of 2020. Loan balances in the second quarter 2020 grew $94.4 million, which is primarily due to a net $127.0 million paycheck PPP originations included in the commercial and industrial category, offset by our strategy to shrink the residential loans portfolio. Commercial and industrial loans excluding PPP loans increased $19.4 million or 24% on an annualized basis. Commercial real estate grew significantly during the quarter at an annualized rate of 14%. Residential real estate loan production was strong led by refinancing activity given the lower interest rate environment. The majority of residential production was sold in the secondary market to generate fee income. Total securities increased modestly $15.6 million in the second quarter as we continued our investment portfolio remix. The loan to deposit ratio was 101% in the second quarter 2020 compared to 98% at year-end, slightly elevated given the surge in PPP loans despite strong growth in relationship deposits which were offset by lower brokered deposit balances.

The second quarter 2020 allowance for loan losses increased $1.2 million to $16.5 million including net charge offs totaling $142 thousand and a provision for loan losses relatively consistent with the first quarter 2020. The allowance for loan losses to total loans ratio for the second quarter expanded to 0.60% from 0.58% in the first quarter 2020. Excluding PPP loan balances, which are backed by the SBA, the allowance for loan losses to total loans increased to 0.63%. Past due and delinquent loans as a percentage of total loans decreased to 0.84% from 1.30% at the end of the first quarter. Commercial non-accrual loans in the second quarter increased $3.9 million primarily due to two commercial loan relationships; one where the existing carrying value is expected to be fully recovered at settlement and another where a $349 thousand specific reserve was recorded to adjust the loan to its net realizable value. There were some residential loans that continue to hover around 90 days past due and we took a conservative approach by placing the loans on non-accrual status. While the impact of COVID-19 and other market conditions remain uncertain, we believe the existing allowance for loan losses is sufficient to absorb inherent losses based on our disciplined credit approach, experienced losses and methodology, and current and ongoing stress testing reviews of the portfolio. We performed a stress test of the commercial portfolio in the second quarter analyzing potentially vulnerable NAICS codes, in addition to our normal migration analysis. The following segments of the commercial loan portfolio were identified for stress testing: hospitality loans with a loan-to-value in excess of 65%, all loans contained in the Company's top 50 relationships, and all loans $1.0 million or greater with risk ratings of special mention or higher. The results of our stress testing did not indicate any meaningful deterioration in the overall quality of the commercial portfolio and any impact was considered in the adequacy of the allowance for loan losses as of June 30, 2020.

The Company's liquidity position remains strong. During the quarter we initiated pandemic-specific liquidity stress tests to analyze potential impacts from payment deferrals, unanticipated use of committed lines of credit, as well as the possibility of required servicer advances on sold loans. At June 30, 2020, available same-day liquidity totaled approximately $1.3 billion, including cash, borrowing capacity at the Federal Home Loan Bank of Boston (FHLB) and the Federal Reserve Discount Window and various lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Company's amortizing securities and loan portfolios. The Company had unused borrowing capacity at the FHLB of $559.2 million, unused borrowing capacity at the Federal Reserve of $82.4 million and unused lines of credit totaling $51.0 million, in addition to over $200.0 million in unencumbered, liquid investment portfolio assets. The Company has also utilized the Federal Reserve's Paycheck Protection Program Liquidity Facility to provide liquidity to fund PPP loans.

The Company's book value per share was $26.56 at the end of the second quarter 2020 compared to $25.90 at the end of the first quarter 2020. Tangible book value per share (non-GAAP measure) was $18.18 at the end of the second quarter 2020 compared to $17.70 at the first quarter 2020; an annualized growth rate of 11%. The low interest rate environment continues to have a positive impact on the fair value of the Company's securities portfolio. Other comprehensive income included unrealized gains on securities totaling $11.4 million in the second quarter 2020 compared to $9.6 million at the end of the first quarter 2020.


Net income in the second quarter 2020 was $8.5 million, or $0.55 per share, compared to $6.1 million, or $0.39 per share, in the same quarter of 2019. The non-GAAP measure of core earnings in the second quarter 2020 totaled $8.6 million, or $0.56 diluted earnings per share, compared to $6.3 million or $0.41 per share, in the same quarter of 2019. Net interest margin in the second quarter 2020 increased to 3.00% from 2.65% in the same period of 2019. The increase is primarily driven by lower borrowing levels as the average balance decreased to $612.5 million in the second quarter 2020 from $790.0 million in the second quarter of 2019 due to continued deleveraging strategies. These balance sheet strategies along with federal funds rate cuts that began in the second half of 2019 improved borrowing costs to 1.51% in the second quarter 2020 from 2.74% in same quarter of 2019. Costs of interest-bearing deposits also decreased to 0.81% compared to 1.32% in the second quarter 2019 due to the federal fund rate cuts and lower brokered deposits associated with deleveraging activities. Yields from earning assets were 3.81% compared to 4.13% in the second quarter 2019 reflecting loan originations and repricing of variable rate products in a lower interest rate environment. Excluding the effects of PPP loans, the second quarter yield on total earning assets was 3.89%. PPP loans are expected to increase interest income with accelerated accretion during the second half of 2020 as loans are forgiven by the SBA.

The second quarter 2020 provision for loan losses increased to $1.4 million from $562 thousand in the same quarter 2019. The increase is primarily due to qualitative adjustments made in the general reserve to reflect a downward economic trend that started in the first quarter 2020. Also included in the second quarter 2020 provision is a new $349 thousand specific reserve related to one commercial real estate relationship that is expected to be settled at its carrying value.

Non-interest income in the second quarter 2020 was $9.7 million compared to $7.5 million in the same quarter in 2019. The increase is primarily due to a $704 thousand increase in mortgage banking income associated with secondary market sales and a $1.4 million gain on sales of securities. Trust and investment management fee income contributed with a 3% year-over-year increase based on assets under management reaching $2.0 billion compared to $1.8 billion in the second quarter of 2019. Customer service fees were $2.4 million for the second quarter 2020 compared to $2.6 million from the same quarter of 2019 due to fewer customer transactions in the current economic environment associated with COVID-19.

Non-interest expense was $22.3 million in the second quarter 2020 compared to $20.9 million in the same quarter of 2019. The increase is primarily due to a $1.4 million loss on extinguishment of debt in the second quarter 2020 representing a prepayment penalty on a longer term and higher cost FHLB borrowing. Salary and benefit expense and occupancy and equipment costs were also higher during the second quarter 2020 to support the Company's expanded branch model and wealth management business.


Bar Harbor Bankshares (NYSE American: BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 130 years. Bar Harbor provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit


Certain statements under the headings 'SECOND QUARTER FINANCIAL HIGHLIGHTS', 'FINANCIAL CONDITION' and 'RESULTS OF OPERATIONS' contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ('Securities Act'), and Section 21E of the Securities Exchange Act of 1934, as amended ('Exchange Act'), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this earnings release the words 'may,' 'will,' 'should,' 'could,' 'would,' 'plan,' 'potential,' 'estimate,' 'project,' 'believe,' 'intend,' 'anticipate,' 'expect,' 'target' and similar expressions are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying forward-looking statements. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that the Company files with the Securities and Exchange Commission, including but not limited to those discussed in the section titled 'Risk Factors' in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Because of these and other uncertainties, the Company's actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, the Company's past results of operations do not necessarily indicate future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. The Company is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. The Company qualifies all of its forward-looking statements by these cautionary statements.


This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ('GAAP'). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP core earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP core earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including gains/losses on securities, premises, equipment and other real estate owned, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates core earnings per share based on its measure of core earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP core earnings and core earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.



Josephine Iannelli; EVP, Chief Financial Officer & Treasurer; (207) 288-3314


  1. Core measurements are non-GAAP financial measures adjusted to exclude net non-operating charges primarily related to acquisitions, restructurings, system conversions, loss on debt extinguishment and gain or loss on sale of securities, other real estate owned and premises and equipment. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.
  2. Non-GAAP financial measure.
  3. All performance ratios are based on average balance sheet amounts, where applicable.
  4. Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
  5. Earning assets includes non-accruing loans and securities are valued at amortized cost.
  6. Assets acquired from eight branches purchased from People's United Bank, National Association as of October 25, 2019, were excluded from calculation.







AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED


  1. Total loans include non-accruing loans.
  2. Average balances for securities available-for-sale are based on amortized cost.




  1. Assumes a marginal tax rate of 23.87% for the first half of 2020 and the fourth quarter of 2019 and 23.78% in the first three quarters of 2019.
  2. Non-GAAP financial measure.
  3. Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.
  4. Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.
  5. All performance ratios are based on average balance sheet amounts, where applicable.
  6. Adjusted return on tangible equity is computed by taking core earnings divided by shareholders' equity less the tax-effected amortization of intangible assets, assuming a marginal rate of 23.87% for the first half of 2020 and the fourth quarter of 2019, and 23.78% in the first three quarters of 2019.
  7. Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

SOURCE: Bar Harbor Bank and Trust

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